Indonesia’s labor-intensive tobacco industry has been supporting state revenue and employed millions of workers. Photo credit: Setengah Lima Sore, Pexels.
The Indonesian Employers Association (Apindo) urged the government not to raise tobacco excise taxes as part of its plan to boost revenue in 2025.
Apindo chairwoman Shinta Kamdani said in a press statement that the industry needed relief instead of additional pressure, since producers already faced higher excise this year.
“If a higher excise […] is implemented without considering the real conditions of the labor-intensive [tobacco] industry, risks of weakening competitiveness and eroding job opportunities will only grow. As a matter of fact, this sector is the one that has been supporting state revenue and employed millions of workers,” Shinta said.
She also expressed hope that the government’s pledge to avoid new taxes or higher tax rates next year would include excise duties.
Next year’s state budget targets a 10% increase in overall revenue, from the IDR2.86 quadrillion (US$174.9 billion) expected to be collected. Current revenue collection remains sluggish, raising questions about how the government will meet its goals.
Finance minister Sri Mulyani Indrawati said in August that tax revenue would need to grow 13.5% year-on-year to hit the target, which she described as “rather high and ambitious.” She is widely expected to leave her post in president-elect Prabowo Subianto’s first cabinet reshuffle.
Sri Mulyani also ruled out regulatory changes to pursue the tax collection target, signaling that higher tax rates were unlikely. Instead, she pointed to “internal reform,” including improvements to the Coretax system, as the main strategy.